MTD and the cloud

The soft landing was due to come to an end in April 2020 but was extended to April 2021 as a result of Covid-19.

From now on, HMRC will issue penalties for not keeping complete and ‘adequate’ digital records for VAT returns – which means copy and paste data is no longer sufficient.

If your business has not yet fully embraced digital VAT reporting, you need to do so now.

What software will I need to be MTD compatible?

You will need to use what is defined as ‘functional compatible software’ to comply with HMRC requirements.

This means software that connects to HMRC’s systems via an Application Programming Interface (API). It can be a single program or a set of programs, so long as those programs are ‘digitally linked’.

Your software must be able to:

Retain and preserve records digitally.

Create VAT returns and send them to HMRC digitally.

Voluntarily provide HMRC with VAT data.

Receive information
from HMRC that your
business has complied.

How will the
rules differ regarding
digital records?

The major difference is that you will be required to submit your digital records at least once every three months.

Your business will also be required to maintain records for your VAT account. All digital records will need to be retained for a minimum of six years.